Amex at last to profit from DJs joint venture

Amex's accounts suggest that either its customers are getting savvier in paying off their bills in time, or the card provider is having to offer more generous terms to compete with rivals.

AMERICAN Express Australia is in danger of making a respectable profit when its credit card joint venture with David Jones reverts to a profit-sharing arrangement from next year.

According to Amex Australia's just-filed results with the Australian Securities and Investments Commission, the local business made a net profit of just $8.2 million in calendar 2011 from turnover of $1.15 billion. Sad as that might look, it made only $2 million in 2010 and before that had not earned a profit here since 2005.

Broker estimates last month were that DJs will lose about $25 million of earnings, before interest and tax, when the sharing arrangements begin. Theoretically, that means a major jump in profit for Amex - which ought to please its New York masters mightily, because it seems to have been seriously underperforming the rest of the global charge and credit card group.

Amex's 2011 annual report for the parent states that revenue for the Japan, Asia/Pacific and Australia region was $US3.1 billion in the year, and pre-tax income was $US430 million. So Australia put in one-third of the revenue but an anaemic 3.5 per cent of earnings, based on its $15.5 million pre-tax profit.

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Like many a credit card user/abuser, Amex Australia's financial fortunes get nibbled away at each year by the $238 million of finance costs on the money needed to support its rolling lending book of about $4.3 billion in receivables from customers.

Amex's accounts also suggest that either its customers are getting savvier in paying off their bills before interest begins accruing, or the card provider is having to offer more generous terms to compete with rivals, because the value of credit card receivables that earn interest for the company fell by almost one-third to $1.6 billion - which would explain why interest income was also down by almost $40 million.

While former Australian managing director Pierric Beckert was replaced in January by Lisa Vehrenkamp, Beckert was shuffled back to New York in an executive vice-president's role styled as a promotion by Amex. That suggests that in spite of the fact the company made losses for almost all of his time as boss since 2005, they are not being sheeted home to Beckert.

ATM takeover bid

CANADIAN ATM operator DirectCash Payments seems to be betting the farm on its company-doubling $173 million bid for Australia's largest operator of ATMs, Customers Ltd.

Customers' shares yesterday soared to close at $1.24 after it announced the agreed scheme which, if successful, will see DirectCash pay $1.27 a share for all of Customers.

The deal is, in Insider's opinion, a risky one for both sides. The Toronto-listed DirectCash still needs to come good with committed financing to cover not just the cost of buying the shares, but absorbing Customers' existing $37 million of debt.

While it is buying a business that has forecast earnings before interest, tax, depreciation and amortisation of about $37 million this year, and generates a similar amount of revenue to itself, DirectCash had only $100 million of credit lines available at December 31 and less than half that not utilised.

DirectCash has a sharemarket worth about 2.5 times that of Customers, but its EBITDA is not a lot greater than Customers'.

It is no coincidence that both companies market the same brand of Korean-made ATM, so the Canadians would have a good idea of the earning capacity of the Australian business.

For Customers investors it is a remarkable turnaround in less than a month since chairman Peter Polson announced chief executive Tim Wildash's speedy departure and replacement, a day later, by former AWB executive John Russell.

Polson chaired AWB for two years, so would no doubt be familiar with Russell - although whether he warned him that his gig running a public company might end within a couple of months of getting the job, is unknown.

What's a weekend?

GORGEOUS to see that Australia's major banks are clearly fans of hit period drama Downton Abbey. How else to explain their campaign to redefine weekends as part of the working week?

Possibly the series' most famous line - ''what's a weekend?'' - was uttered by Grantham family matriarch Lady Violet (played by Maggie Smith) when the estate's heir was saying he would catch up on family business at weekends.

It neatly captured the viewpoint of those who have never had their life interrupted by awkward things like jobs. Now the argument revolves around those who rarely have their jobs interrupted by awkward things like weekends.

The banks' campaign, which coincides with a broader push among employer groups to push back on penalty rates, has some breathtaking ironies - not the least of which is that it was only a couple of decades back that banks opened their doors only between 10am and 3pm, Monday to Friday.

Miss that close on a Friday and there were no ATMs to rescue your weekend cash needs - although, at least the leisurely settlement systems meant that if you wrote a cheque for the shopping, chances were that it would not be cleared until the end of the next week.

It is only in recent years that some have been opening branches on weekends - and only then Insider suspects, not from a desire to service customers, but largely to exploit the fact that there is money to be made in flogging mortgages on Saturdays.

Still, there is a serious issue to be dealt with here, and one that should not really fall to industrial relations courts to resolve - how do we reconcile the convenience of being able to shop/trade on weekends with an equitable compensation and rostering system for people whose lives are disrupted? People who, for example, never get two consecutive days off - let alone two that coincide with their partners'.

It is not just an issue of productivity and trying to relieve employers from anachronistic penalty rates. It is finding an answer to the much harder question of what kind of social structure we bequeath to future generations.